Is a discounted group-sales amusement-park ticket taxable when admission is called 'free,' and is installing a fiberglass tubeslide a nontaxable capital improvement?

Plain-English summary

George W. Long, Inc. operates an amusement park with several pricing options. Ordinarily it treats $2.80 as the taxable admission (charging 7% tax on it) and separately states a nontaxable charge for the right to ride the rides. For group-sales customers — who buy discounted, generally non-refundable advance tickets through an organization — the park calls admission "free" and charges only for the rides and food, collecting tax only on the food. It also added a fiberglass tube waterslide and asked whether that installation was a nontaxable capital improvement. The park raised two issues.

Issue 1 — Group admission charges. Under Tax Law § 1105(f)(1), admission charges over ten cents to a place of amusement are taxable. Technical memorandum TSB-M-87(15)S lets a park treat the ride portion of a pay-one-price ticket as nontaxable only if three conditions are met: (i) the ticket separately states the ride charge and the admission charge, (ii) a general-admission ticket does not let the customer use the rides, and (iii) the admission charge on the pay-one-price ticket is the same or reasonable compared with the general-admission ticket. Because the park considers $2.80 the admission no matter the total price, that $2.80 of every group ticket is a taxable admission. Unless the group ticket separately states the taxable admission and the nontaxable ride charge, the three conditions are not met and the entire group ticket is taxable under § 1105(f)(1).

Issue 2 — The tubeslide. A "capital improvement" under Tax Law § 1101(b)(9) must (A) substantially add to the real property's value or appreciably prolong its life, and (B) become part of, or be permanently affixed to, the realty so that removal would cause material damage, and (C) be intended as a permanent installation. If the tubeslide meets all three (as the park contends — custom-built, seams destroyed if separated, attached to concrete), the labor is exempt. If it is removable without material damage (as the auditor contends, comparing it to the removable ski lifts in West Mountain Corp., TSB-H-84(38)S), it is not a capital improvement and the labor is taxable. Which is true is a factual question an advisory opinion cannot decide.

What this means for you

Amusement parks and attractions

To keep the ride portion of a combined ticket nontaxable, your ticket must separately state the ride charge and the admission charge, your general-admission ticket must not include rides, and the stated admission must be reasonable next to your general-admission price. Meet all three or the whole ticket is taxed.

"Free admission" labeling doesn't remove the tax

Calling group admission "free" while treating $2.80 as your admission everywhere else does not make the admission disappear. If the group ticket lumps admission and rides together without separately stating them, the entire group charge is a taxable admission.

Capital-improvement treatment turns on permanence

Installation labor is exempt only if the structure is permanently affixed so removal causes material damage and is intended to be permanent (§ 1101(b)(9)). A structure that bolts to a foundation and can be removed without material damage — like a ski lift — is tangible personal property, and its installation labor is taxable. Document permanence (custom fabrication, destroyed seams, concrete anchoring) if you claim the exemption.

Accountants and tax professionals

Issue 1 applies the TSB-M-87(15)S three-part separately-stated test to group discounting; failing to separately state the admission portion taxes the full § 1105(f)(1) charge. Issue 2 is the standard § 1101(b)(9) capital-improvement analysis, left unresolved as a fact question (auditor cites West Mountain Corp. on removability).

Common questions

Q: Can an amusement park treat ride charges as nontaxable?
A: Yes, but only if its pay-one-price ticket separately states the ride charge and the admission charge, its general-admission ticket doesn't include rides, and the stated admission is the same or reasonable next to the general-admission price.

Q: Does calling group admission "free" avoid the admission tax?
A: No. The park treated $2.80 as admission everywhere, so $2.80 of each group ticket is a taxable admission; and if the group ticket doesn't separately state admission and rides, the entire charge is taxable.

Q: Why is the whole group ticket taxable?
A: Because it failed the separately-stated condition of TSB-M-87(15)S. Without separately stating the taxable admission and the nontaxable ride charge, none of the ticket qualifies for the ride exemption.

Q: Is installing the tubeslide a capital improvement?
A: Only if it substantially adds value, is permanently affixed so removal causes material damage, and is intended to be permanent. Whether the slide meets that test is a factual question the opinion did not decide.

Q: Why does the auditor compare the slide to a ski lift?
A: In West Mountain Corp. the ski lifts were removable without material damage to the realty, so they were tangible personal property and not a capital improvement. The auditor argues the bolted-in fiberglass slide is similar.

Citations and references

Statutes and authorities:

• Tax Law § 1105(f)(1) (tax on admission charges over ten cents to a place of amusement)
• Tax Law § 1101(b)(9) (three-part definition of "capital improvement")
• Technical Services Bureau Memorandum TSB-M-87(15)S, Nov. 13, 1987 (conditions for treating the ride portion of a pay-one-price ticket as nontaxable)
• West Mountain Corporation, TSB-H-84(38)S (bolted ski lifts removable without material damage were tangible personal property)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_56s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92(56) S
Sales Tax
July 24, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920512A

On May 12, 1992, a Petition for Advisory Opinion was received from George W. Long, Inc.,
4600 Culver Road, Rochester, New York 14622.
The issues raised by Petitioner, George W. Long, Inc., are:
1.

Whether admission to Petitioner's amusement park for group sales customers is
subject to sales tax where Petitioner provides free admission and a reduced rate for
the rides to such customers.

2.

Whether the installation of a tubeslide is a capital improvement and, therefore,
exempt from sales tax.

Petitioner operates an amusement park. Petitioner has a variety of payment options available
for its customers. A customer can pay solely for admission to the park without the right to ride the
rides. For example, the price for admission to the park might be $2.80 plus sales tax of $.20. An
adult customer can pay one price for admission to the park and the right to the rides. For example,
this price might be $10.00, including the price of admission of $2.80 plus sales tax of $.20 (which
is separately stated) and $7.00 for the right to ride the rides (which is separately stated). A child
customer or an off-hour customer can pay one price for admission to the park and right to ride the
rides. For example, this price might be $8.00, including the price of admission of $2.80 plus sales
tax of $.20 (which is separately stated) $5.00 for the right to ride the rides (which is separately
stated). In all of the above circumstances, Petitioner pays sales tax on the price of admission $2.80
at 7% ($.20). The price of admission is separately stated. Petitioner does not reduce the price of
admission on a percentage basis (based on the adult price) for the child or off-hour customer.
Petitioner considers $2.80 to be the admission price no matter what the total price that is charged to
the customer.
In addition, Petitioner has group sales customers. These customers purchase their tickets from
Petitioner through an organization who is providing them with an opportunity to visit the park at a
reduced rate. This reduced rate is based upon the number of persons in the group. The more persons
in the group, the lower the price. Group sales business is very important to Petitioner, because these
purchases are generally non-refundable advance sales and Petitioner receives the revenue whether
or not the customer comes to the park (e.g. they may not come because of bad weather). In addition,
the group customers get to see and enjoy the park at a reduced rate and it is hoped they will want to
return and enjoy the park and pay Petitioner's regular retail prices. In order to encourage groups to
come to the park, Petitioner provides all of its groups with "free" admission to the park (which is part
of its agreement with each group and the related organization). Petitioner charges only for the right

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TSB-A-92(56) S
Sales Tax
July 24, 1992
to ride the rides and for the food provided in the group sales food area. Since admission to the park
for groups is separately stated to be "free", Petitioner has only been collecting and paying sales tax
on food purchases of groups and not paying sales tax on the amount groups pay to ride the rides.
In addition Petitioner has added a tube waterslide to its waterpark. Petitioner contracted for
the addition (a turnkey operation), except that it directly purchased the fiberglass for the tube
waterslide (the part you slide on) and paid sales tax on that purchase. The installation of the
fiberglass was performed by the contractor, as part of the contract.
Petitioner contends that the waterslide is a capital improvement and therefore no sales tax
is payable on the labor related to the hanging of the fiberglass. The tubeslide was custom designed
to fit precisely on Petitioner's unique terrain and around its existing waterslides. This type of slide
is much different than amusement park rides like the used Sea Dragon Petitioner purchased and had
moved to its park. The Sea Dragon, like most iron rides, is easily taken down and reassembled in a
new location.
Petitioner contends that the tube waterslide is manufactured and custom designed specifically
for Petitioner so that once the seams are joined, they are destroyed when separated. This construction
is necessary in order to insure a safe, smooth surface for sliding. The waterslide is attached to
Petitioner's terrain by being attached to concrete implacements.
Petitioner further contends that the waterslide has added to the value of the real property,
since it has significantly increased Petitioner's park revenue. The waterslide is permanently affixed
to the real property so that removal would cause material damage to the waterslide and it is intended
to be a permanent installation.
In an audit conducted by the Department of Taxation and Finance the auditor contends that
the installation of a waterslide involves numerous different projects which are required before the
actual slide structure is installed. This would include the pouring of concrete for waterways, the
digging of pools, excavating the land, and so on. For these types of projects, the auditor agrees that
these are capital improvements and not subject to sales tax.
The auditor contends, however, that the installation of the actual fiberglass waterslide is
subject to sales tax. The fiberglass structure is bolted into a cement foundation similar to the ski lifts
in the matter of West Mountain Corporation [TSB-H-84(38)S]. It was determined in that case that
the ski lifts were removable without material damage to the realty. Therefore, the auditor contends
that the fiberglass structure itself and the supporting framework is not considered a capital
improvement, but tangible personal property, and therefore the installation of the structure is subject
to sales tax.
Concerning issue "1", Section 1105(f)(1) of the Tax Law imposes a tax on "[a]ny admission
charge where such admission is in excess of ten cents to or for the use of any place of amusement
in the state. . ."

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TSB-A-92(56) S
Sales Tax
July 24, 1992
Technical Services Bureau Memorandum TSB-M-87(15)S, November 13, 1987, provides,
in part, as follows:
Where a place of amusement sells only one type of ticket and that ticket entitles the
customer to admission to the park and use of the rides, the full price of the ticket is
subject to sales tax. However, where a place of amusement sells both a pay-one price
ticket and a general admission ticket, the portion of a pay-one price ticket attributable
to the use of rides will not be subject to sales tax where:
(i)

the pay-one-price ticket separately states the charge allocated to the
use of the rides and the charge for admission, and

(ii)

the general admission ticket does not allow the customer use of the
rides, and

(iii)

the admission charge shown on the pay-one-price ticket is the same
or reasonable in relation to the charge shown on the general
admission ticket.
*

*

*

Example 4 - An amusement park sells a $4.00 general admission ticket which limits
the customer to admission to the park; the customer cannot use any of the amusement
rides unless he purchases a separate ticket or tickets. The park also sells a $10.00
pay-one-price ticket which separately indicates a $6.00 charge for the use of the
amusement rides and a $4.00 charge for admission. Since the separate charge for
admission ($4.00) on the pay-one-price ticket is the same or reasonable when
compared to the general admission ticket limiting the customer to admission to the
park, the separately stated portion of the pay-one-price ticket ($6.00) representing the
use of the amusement rides is not subject to sales tax.
Petitioner discounts its pay-one price ticket for group sale customers based upon the number
of persons in the group. Pursuant to TSB-M-87(15)S, supra, where a place of amusement sells both
a pay-one price ticket and a general admission ticket, the portion of the pay-one price ticket
attributable to the use of rides will not be subject to sales tax where the charges for the rides and
admissions are separately stated, general admission tickets do not allow customers the use of rides,
and admission charges shown on the pay-one price ticket is the same or reasonable in relation to the
charge shown on the general admission ticket. Petitioner considers $2.80 to be the admission price
no matter what the total price that is charged to the customer. Therefore $2.80 of a group sale ticket
constitutes a taxable admission. Accordingly, unless the discount ticket offered to group sale
customers separately states the taxable admission charge and the non-taxable charge to ride the rides,
the three conditions set forth in TSB-M-87(15)S, supra, are not met and the entire charge for a group
sale ticket is subject to the tax imposed under Section 1105(f)(1) of the Tax Law.

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Sales Tax
July 24, 1992
With respect to issue "2", pursuant to Section 1101(b)(9) of the Tax Law a "capital
improvement" is an addition or alteration to real property which:
(A) Substantially adds to the value of the real property, or appreciably prolongs the useful
life of the real property; and
(B) Becomes part of the real property or is permanently affixed to the real property so that
removal would cause material damage to the property or article itself; and
(C) Is intended to become a permanent installation.
Accordingly, pursuant to Section 1101(b)(9) of the Tax Law in the instant case if, as
Petitioner contends, the installation of the tubeslide substantially adds to the value of the real
property, is permanently affixed to the real property so that removal would cause material damage
to the property or article itself, and is intended to become a permanent installation, the installation
of such tubeslide would constitute a capital improvement and the labor charges would be exempt
from sales tax. On the other hand, if the tubeslide is not permanently affixed to the real property, as
contended by the auditor, so that removal would not cause material damage to the property or the
tubeslide itself, the installation of the waterslide is not a capital improvement, and, therefore, the
labor charges would be subject to sales tax.
A determination of whether the installation of the tubeslide constitutes a capital improvement
is a factual question which cannot be determined in an Advisory Opinion. An Advisory Opinion
merely sets forth the applicability of pertinent statutory and regulatory provisions to a "specified set
of facts" Tax Law, section 171, subd. twenty-fourth; 20 NYCRR 2376.1(a).

DATED: July 24, 1992

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.